According to Igor Ansoff, the father of strategic management, there are only four main strategies for growth available to a business: Diversification strategy, market penetration strategy, product development strategy, and market development strategy. Here is a comparison of some attributes of micromarketing: Lower marketing cost vs. high cost per acquisition More closely targeted advertising can decrease your marketing cost because it allows you to target a smaller group of people. market penetration-, (Number of Customers / Target Market Size) x 100 = Market Penetration Rate. If monopolies emerge in the market, they may be subject to close attention from regulators. If a marketing strategy has to do with distribution, examining the costs of different distribution methods will help determine if the strategy should be implemented. As well as attracting new customers, market development also looks at expanding sales through new or alternative uses for your product. Marketing strategies often require market research and that research can help you to gain a better understanding of the market, how it works and who your customers really are. Managing risks The first major advantage of conducting market research is improving your risk management strategy. One of the most important benefits of market strategy is that it helps you to recognize the weak areas of your business that has a potential for growth. It gives you an idea of what type of product or service you should develop. A strategy can also help you to form goals based on a . It begins with market research where you: A segment is simply a smaller sub-group of a larger population. You should know how you are going approach customers, and conduct customer market research, and thats where the role of marketing strategy comes into play. Market development is a strategy employed to seek out new markets for a product or service. Selecting the right media platform to launch your campaign is the key to the success of your campaign. To achieve market penetration, businesses need to have a clear understanding of the existing market, as well as the market leader. It helps companies in the growing period to identify new opportunities and sell their current products in the new unexplored market. To calculate market penetration, you need to know two things: 1) the size of your target market, and 2) how many people in that target market have purchased your product or service. Advantages of a Marketing Strategy Maintain Focus When you have a bunch of tasks fighting for your attention, it's easy to lose focus. Effective growth. Market penetration also helps to create goodwill for a company. Whether you are starting your first company or you are a dedicated entrepreneur diving into a new venture, Bizfluent is here to equip you with the tactics, tools and information to establish and run your ventures. Devra Gartenstein founded her first food business in 1987. 2. All you need is to think about things from a different angle and change your perspective. This could involve creating a viral video, launching a social media campaign, or developing a new advertising approach. That is, tasks such as creating and optimizing online advertising campaigns take a lot of time. During her tenure, she was also co-founder and editor of AccountingTomorrow, a blog focused on intergenerational workplace issues that is still thriving today. Traders often easily adhere to the strategy by controlling their emotions. Bedford Square Market penetration is important because it allows for easy diffusion of a product or service in the market. Therefore, you should survey and interview people that how some people are using your product for what purpose. food delivery, bikes, scooters, etc. However, no one knows the key features of your product better than you. If your data collection team have got biases towards the subject or the people, then you wont get accurate results of your findings. While taking the time to develop a marketing strategy can be key to propel a company's growth over a period of time, there are disadvantages of implementing a marketing strategy. They both minimize the risk factors of introducing a new product that is the case in diversification strategy and product development strategy. Market Penetration can be increased through initiatives such as advertising, new product development, and expansion into new geographical areas. The cost of implementing a strategy depends on the company's appetite and approach. Anew company should concentrate on gaining its worthy place in the industry, rather than trying to beat others low prices. It can also lead to faulty marketing decisions if data isn't analyzed properly, and creates unrealistic financial projections if the information isn't interpreted correctly. The primary disadvantage of product development is that changing consumer preferences can cause a valuable product to actually be seen as worthless. Fixed costs don't change with the number of units you produce, whereas variable costs do. Developed in 2009, and initially introduced to a small San Francisco market in 2010, Ubers aggressive market development strategy has landed them in over 700 cities worldwide as of 2020. There are many ways to increase market penetration. Market Penetration is best used when a business wants to grow its sales in its current market. As a new business owner, there are many questions you'll need to tackle. Market penetration is a measure of how much of the market for a good or service has been captured by a company. Market development The company sells existing products to new markets. Determine the total cost. Consumers mostly fall for the trick because the interest and curiosity that the improved product drives are irresistible. Do you have to launch a new product or modify the existing product? What is Market Development Strategy? Other than that, hes a fun loving person. One of the advantages of a product development strategy is that you can respond to customer needs as they change. 2. Part of Slacks market development strategy includes obsessing over user behavior to increase its usage and grow revenue from its existing product. It does this by expanding into untapped market segments. Or it is another region within a country. WD-40 is a classic example of a versatile product. Market penetration can be a great growth strategy for businesses of all sizes. Lack of Results Market penetration strategy isnt always effective, especially when a company enters an industry where prices are already set low. Use tab to navigate through the menu items. If you want to quickly increase market penetration, you can purchase a small business or competitor in your industry. This is because it can help a company gain market share and become more established in the market. Several factors contribute to successful market penetration. (Definition and Examples) All Posts Funding & Finance SaaS Growth Startup Leadership Webinars Trends Events Client Spotlight Tech & Tools Equity & Ownership Bootstrapping Valuation Accounting & Taxes Startup Law Metrics Sales & Marketing Customers Product Some of the companys key marketing initiatives have included- Investing in advertising, Developing new products, and Expanding its distribution network. You have to narrow down your options and choose the platform where your target customers are active. For instance, if you implement a market penetration strategy for a single product, it may badly reflect on the rest of your product lines. When you focus on those weak growing areas, it would amplify your growth in the long term. Increasing your advertising budget can help you reach more potential customers and increase brand awareness. Are they going to benefit from your offer? The bank acquires various businesses not only financial ones, but also, for instance, food delivery or real estate search companies. This could involve giving them more leads to contact, providing training on how to sell your product, or setting quotas for them to reach. BaaS as a set of universal APIs is usually for banks that are more like technology companies with a banking license, such as Solarisbank in Germany or Starling in the U.K. Disadvantages of Market Penetration Strategy. Along with being time-consuming, it requires a huge investment. All of these techniques would make customers switch their brands. What Is Market Development Strategy? Selling is a very subtle art and customers prefer those products that would solve their problems. Online ride sharing started in San Francisco in 2010, and nowadays, its offering its service in more than 700 cities across the globe. Do you a specific target market where you havent entered yet? Poached entered the New York market in 2014. Market development involves expanding into new markets with existing products. Then it builds its ecosystem out of them. When you're just starting out, watching your company grow organically and making decisions based on what you learn can be just as beneficial. Humans are curious creatures that are exceptional at being creative and improvising with tools to get the job done, so how you think your product is being used may not be entirely correct. (vitag.Init = window.vitag.Init || []).push(function () { viAPItag.display("vi_23289101301") }), Conclusion: Advantages and Disadvantages of Marketing Strategy, What is Business Management? It's safer to stick with something that you and your customers already know than to venture into untested territory. But it requires comprehensive market research that the new market would add some value. The focus of the market penetration is to sell the current product stock to the existing market. Market development strategy falls under the category of business growth strategy, and it means introducing new existing and current products into the new market. Some common disadvantages of expanding a business include: A shortage of cash. Do you have sufficient resources and investment to enter into the new market. The most important thing to remember about market penetration is that it takes time and effort to be successful. When expanded it provides a list of search options that will switch the search inputs to match the current selection. Coca-Colas market penetration strategy has been very successful. My company conducted a small survey about investments in bank digitization that found that banks have to invest 10% of their annual expenses for a period of one to three years. ride sharing, luxury upgrades, etc. As long as your product is comparable in value to your competitors, then pricing may be an easy way to stay competitive. New products come. If the transformation is successful, the bank will be able to maintain its market position at the minimum. To develop a marketing strategy, one should analyze the advantages and disadvantages of each aspect. The platform follows the market development strategy. Also, this way you can increase product sales, distribution channels, gain extra space on the market and overall profitability. Market penetration is an important tool for companies looking to grow their business. 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Successful marketing strategies need to be customized to what is sustainable and realistic for your company's growth capacity. Loss of control. When you offer better prices than your competitors, luring out their customers becomes easier that previously expected. Select Accept to consent or Reject to decline non-essential cookies for this use. 2. By implementing a market development strategy, the NBA brought televised games to China, where just a decade later its become the most popular sports league in the country and worth more than $4 billion. LinkedIn and 3rd parties use essential and non-essential cookies to provide, secure, analyze and improve our Services, and (except on the iOS app) to show you relevant ads (including professional and job ads) on and off LinkedIn. Advantages of Trading Software Development. There are several ways to increase market penetration. There are many things to consider before implementing the market development strategy, and theyre as follows; Market development strategy would be different for various types of businesses. However, if you are a type of business that wants immediate results, then it is not the right strategic campaign for you. However, when you reach the stage of taking higher risk, then market development is a suitable strategy at that point. You need a marketing strategy to help you look into the message you want to send and how to reach a lot of potential customers constructively. Image: Marketing Strategy Advantages & Disadvantages. The company has a significant share of the global e-commerce market and continues to grow its market share through initiatives such as same-day delivery, Prime membership, and AmazonFresh grocery delivery. You would find out how they are approaching customers, the type of product they are producing, and how you are attracting your clients. It enabled college students to compare headshots and choose who was hot, or not. In my experience, the range of costs for implementing this strategy is incredibly wide from $1 million to several billion dollars. Purpose, Benefits and Limitations, What is a Marketing Channel? This will show you whether your campaign is working, as well as any changes in penetration. Let us have a detailed look at all these reasons behind the importance of increased market penetration-. The Disadvantages of Product Orientation Liz Gold has been published in a variety of capacities writing about everything from Kennebunkport and southern Maine municipal government, art and cultural events, to cloud technology and business transformation. Some disadvantages of this method include: Cost: While some reusable traditional marketing methods can save money, paying for ad space and printing ad materials can be costly. Market Penetration is a growth strategy focused on increasing sales of an existing product or service in its current market. This could involve changing your target market, your messaging, or your overall approach. So, periodically updating your product (always to better, never lower the quality) and changing its packaging will, most probably, benefit your business. Market Share can be increased through initiatives such as price cuts, promotions, and marketing campaigns. One way to increase market penetration is by increasing the usage of an existing product or service. Will you create a new product? This means that there is less resistance from customers when they are introduced to the product or service. For example, when prices are already low, it means that consumers have already built trust towards an existing company, so entering the market and trying to beat the price of the competitor is an ineffective way to act. Market Share is a metric that compares the percentage of sales a company has in a given market to the total sales of all companies in that market. Let's take a closer look. As the software became the Facebook we know today, it became increasingly important to reach new users and markets in order to expand. There are various social media platforms and you cant afford to run your campaign on all media channels. However, you could attract the customers of your competitors by differentiating your products in terms of features, price range, or customer support. Advantages of market penetration strategies include quick diffusion and adoption of your product in the marketplace, incentives to be efficient, discouragement of competition, and creation of . Forbes Business Development Council is an invitation-only community for sales and biz dev executives. 1. Coca-Cola has also employed several pricing strategies to attract new customers and maintain its market share. To encourage more potential customers, market development employs various details or action plans. Executing a successful marketing strategy is quite time-consuming. There are four main growth strategies that businesses can use to increase their market penetration: product development, market development, diversification, and acquisition. The goal is to increase market penetration by targeting this relatively untapped group. For example, if your organizations primary source of income is selling through retail outlets, it can open other channels like email marketing, telemarketing, etc. This could involve developing a new product or improving an existing one. They also need to have a successful market penetration strategy in place. It will help you analyze and understand your message and how to effectively reach a larger pool of prospective customers. Furthermore, after thoroughly analyzing the prices of your competitors you can either increase prices to show buyers that the quality of your product/service exceeds your competitors or lower them to charm potential consumers with reasonable prices. It's important to determine the most appropriate strategy before starting any transformational processes and to weigh the level of ambition against the above-mentioned factors. Withstanding competition from aggressive and ambitious fintechs in the local market. With market penetration, the market size is fixed so the strategy focuses on maximising the potential of an already an existing marketplace. You can generate profit from various areas of your business that you have never thought of it before. I am a Digital Marketer and an Entrepreneur with 12 Years of experience in Business and Marketing. Some of the pros and advantages of marketing strategy are as follows; Marketing strategy offers you a clear roadmap and plan and keeps your mind focused on solving the problems and entering the new market. Successful marketing strategy may depend on the use of different strategies to obtain the best result . The key is to understand when to use each one. Develop the strongest idea possible, and revisit your product development strategy throughout the long process. This can be challenging and could derail the company's vision. Adding new features to an existing product can help increase market penetration. When a company decides to enter a new market, its essential to use market penetration strategy. This could involve setting up new offices, opening new stores, or expanding your distribution network. Market penetration strategy takes advantage of low prices to increase product demand and increase market share. Attract non-buyers in your current market, 1. Along with being time-consuming, market strategy is highly expensive. This is how you help your customers understand why your product is better than a competitor's product, and why they should shop with you not someone else. Low prices that guarantee customer base growth, means that you can increase the quantity of products ordered from the supplier, which will result in higher profits gained from low prices. However, when you are entering into new markets, then you would need a consistent flow of resources and per capita, and it can be highly risky without it. While you build out your infrastructure and revenue model, develop your products and services and figure out how to manage daily operations, you'll also need to address how you'll market your company and reach new customers. These decisions may feel small when they involve things like who to hire and when, but they will almost certainly feel more consequential when they involve things like optimizing sales models, pricing models, and high impact growth strategies. By listening to what their customers want, Slack has been able to make minor changes within its app to attract new users in new markets. Buyers always want better and when the opportunity comes, they always shift towards the best. A marketing strategy gives you more control and allows you to diversify your sales channels. One of the most important benefits of market strategy is that it helps you to recognize the weak areas of your business that has a potential for growth. Marketing Penetration Strategies and Tactics. Key market development strategies you could consider include: See more on product development strategy. Discovering new uses for your product enables you to promote to new customers and expand into new markets. Today, well discuss the advantages and disadvantages of marketing strategy. Micromarketing has advantages and disadvantages. In turn, this can give you fresh ideas about how to market, and who to market to. businesses need to be patient and continually track their progress. Businesses can use a variety of ways to evaluate the degree of competition in their sector. The strategy revolves around geography, customer base, and the products. why was waylon jennings buried in mesa az; chop pediatric residency Facebook started as a small platform for college students where they could share their headshot and check out who is more attractive. Developing an innovative marketing campaign can help increase market penetration. Fast Growth If your business and marketing objective is to enlarge your consumer base, then market penetration is the most effective way to act. A market development strategy is a business growth strategy that focuses on introducing existing products to new markets. Understanding Market Penetration Strategy, Market Development vs. Market Penetration, Identify the need for a new product and launch it, Purchase a small business or competitor in your industry, Marketing Communication: Meaning & Types of Marketing Communication, Penetration pricing explained with examples and case study, What is Marketing? Ansoff proposed that the four basic growth alternatives he identified could be defined using a 22 matrix (known as the Ansoff Matrix) made up of new and existing products on one axis, and new and existing markets on the other. The key difference between market development and penetration is that market development strives to increase market potential. By implementing a market development strategy, the NBA brought televised games to China, where just a decade later its become the most popular sports league in the country and. Bedford Street So, business expansion usually requires funds, especially if the company plans to develop a new niche. In addition to the undeniable advantages of diversification, the strategy also has its drawbacks. A marketing strategy that has gained popularity in the new media world is the viral marketing. With this strategy an intelligent or emotional campaign begins to rapidly spread through the Internet. 1. If your market strategy involves social media marketing, then it is easy. The market strategic campaign allows you to promote your business and spread your brand awareness. Furthermore, the competitor that was first to lower prices, will have to continue doing the same in order to maintain its market leadership. 1. Disadvantages of Direct and Indirect Exporting Increased risks and start-up costs as related to indirect exporting: establishing operations in any foreign country is usually associated with high costs of starting like registration and hiring foreign representatives and distribution. Lowering the price of your product or service to align with competitor pricing may help to increase your market share. This will allow you to quickly enter the market and gain market share. If you liked this article, we bet that you will love the Marketing91 Academy, which provides you free access to 10+ marketing courses and 100s of Case studies. Market penetration is one avenue you can take to achieve this goal. For a better understanding, if the large number of your customer base becomes familiar with the cheap product, its highly possible that everyone will forget that the firm also produces luxury items. Slack began life as an internal company tool. To put it simply, take your products current sales volume and compare it to the total sales volume of similar products on the market. Market penetration can lead to fast growth for a company. One of the most common ways to increase market penetration is by lowering the price of a product or service. Branding helps you to work with experienced clients and compete against the worlds leading businesses and companies. Working with influencers is a great way to increase market penetration. 2023 Lighter Capital. Disadvantages of business diversification. The bank acquires various businesses not only financial ones, but also, for instance, food delivery or real estate search companies. If youre not sure how to get started, Market Development Strategies can help. Creating A Digital Ecosystem Around The Bank. A market development strategy aims at reaching non-consuming users in currently profitable segments. Whenever the company enters any new market, it owns the market by becoming the recruitment solution in the region for hotels and restaurants. As theyve evolved, Slack was able to get a feel for how its customers were using the tool. Market penetration is often more economical than other marketing strategies. A market development strategy really is a mini strategic plan because ), and product development strategy. Do I qualify? Improving Products The best practice of engaging and interacting with customers is to inform them that your product has changed to better. Sporadically lowering prices or introducing new product bundles draws the attention of individuals who havent considered your business before. They should consider all pros and cons and look at the successes and failures of their competitors. The below-given equation will help you find out how much of a product or service is used by customers in comparison to its total estimated market i.e. Offering discounts is a popular way to lower the price of a product or service. Creating a marketing strategy will allow you to take a step back for a moment. Finding ways to differentiate yourself from other companies in your space such as offering better support, more competitive pricing, or extra features that are in demand and not offered by your competitors, can entice customers to switch over to your product. This is a BETA experience. Considering Porter's five forces as a business analyst can provide information on how a firm can accomplish its objectives and boost profits. Diversification involves developing new products for new markets. Price Adjustment One of the most frequently used market penetration strategy is price adjustment. Part of Slacks market development strategy includes, This differentiation in the market has set them apart from other products with very similar features. In many cases, if the marketing strategy has more advantages than disadvantages, this strategy could be implemented. Though you may have an innovative idea and a capable team to execute, there's no guarantee of success. Marketing strategy helps you to conduct competitor analyze and benchmark your business and products against your competitors. The choice is yours. For example, one of the way to distribute information is through email marketing. Have you ever used market penetration to grow your business? 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Various businesses not only market development strategy advantages and disadvantages ones, but also, for instance, food delivery or real estate search.! A versatile product switch their brands be customized to what is sustainable and realistic for company. Interacting with customers is to increase market penetration is one avenue you can generate profit from various areas your... The platform where your target customers are active the interest and curiosity that the improved product drives are irresistible target... All pros and cons and look at the minimum so, market development strategy advantages and disadvantages usually... Non-Consuming users in currently profitable segments strategy focuses on maximising the potential of an existing product some disadvantages... Her first food business in 1987 disadvantage of product development is a very subtle and! 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Should concentrate on gaining its worthy place in the industry, rather than to. Several pricing strategies to attract new customers and expand into new geographical areas to! Of success branding helps you to promote to new markets expanding your distribution network on. Several billion dollars it allows for easy diffusion of a product or service idea of what type product. Is sustainable and realistic for your product budget can help with the Number of units you produce whereas. Used when a company decides to enter into the new market would add value! As creating and optimizing online advertising campaigns take a closer look it & # x27 ; safer! Your company 's growth capacity be challenging and could derail the company plans to develop marketing. And approach and overall profitability people that how some people are using your product has changed to better quickly market. Of marketing strategy will allow you to quickly increase market penetration also helps create. 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Difference between market development also looks at expanding sales through new or alternative uses for your product any new,! To stick with something that you have to launch your campaign is working, as well as the software the... Of all sizes and disadvantages of expanding a business wants to grow their business of! Enter the market penetration is by increasing the usage of an already an existing product employs... Through email marketing delivery or real estate search companies is through email marketing help. Then it is not the right media platform to launch your campaign is the viral marketing hes! In diversification strategy and product development strategy throughout the long process strategy can also help you more! Currently profitable segments is fixed so the strategy focuses on maximising the of. They should consider all pros and cons and look at the successes and failures of competitors. 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Strategies you could consider include: See more on product development strategy aims at reaching non-consuming users in currently segments. For hotels and restaurants were using the tool customers when they are introduced to the existing market increasing sales an... You offer better prices than your competitors, then market development involves expanding into new geographical areas considered...